The pound slipped in value against both the US dollar and the euro last month, with markets reacting to concerns over economic growth and interest rate expectations. Unfortunately, these shifts are not just abstract market movements, when the pound falls it has a tangible impact on individual finances.
A weaker currency affects everything from the cost of a holiday abroad to the performance of pensions and investments.
Here are some things to consider and how the fall in sterling can affect your wallet.
Travel abroad
If you’re planning an overseas holiday, a weaker pound makes travel more expensive because exchange rates determine how much local currency you receive for your pounds.
When sterling is weaker against the euro, trips to European destinations cost more, from hotel stays to meals out. Similarly, visits to the United States become pricier when the pound buys fewer dollars.
If you’re planning trips in the coming months you may want to book accommodation and activities in advance or use prepaid travel money cards to lock in rates, in case they move further.
Imports and shopping
A weaker pound also affects the cost of imported goods and can push up inflation – something that happened in 2017 after the EU Referendum.
Many everyday items in shops are sourced from abroad, whether food, clothing or electronics. When sterling loses value, businesses pay more to bring in those products, and some of those higher costs are often passed on to consumers.
This creates inflation, which is already uncomfortably high at just under 4% according to the Office for National Statistics (ONS).
Investing and pensions
For investors, currency movements can have mixed effects. UK-based investors who hold international shares or funds may see the value of those assets rise in pound terms, as foreign earnings are worth more when converted back.
On the other hand, companies that rely heavily on imported materials or components may face increased costs, which can affect profits and ultimately share prices.
Pension funds and long-term savers with diversified portfolios may also notice fluctuations, although many pension schemes are designed to smooth out short-term volatility.
Why it matters
Currency values are influenced by a range of factors, including central bank policies, economic performance and global confidence. And while the pound has fallen recently, there’s no indication that this will continue indefinitely, the market fluctuates naturally over time.
Indeed, the pound is in a much stronger position now than it was during the 2022 ‘mini-Budget’ crisis under former Prime Minister Liz Truss.
The fall in the pound is not a reason to panic, but it is a reminder that exchange rates can ripple through personal finances in many ways. Travellers may face higher bills, shoppers may see more price rises, and investors may notice swings in the value of their holdings.
The sterling’s decline highlights how global economic shifts connect directly to everyday financial decisions. While some effects may be temporary, others can shape household budgets and long-term savings.
If you are concerned about how currency movements could affect your finances, it may be wise to speak with your financial adviser here at Insight. We can help assess any risks in your portfolio and suggest strategies to protect your money against further exchange rate risks.
Sources:
www.theguardian.com/business/2025/sep/02/uk-hit-by-fresh-sell-off-in-government-bond-markets-as-pound-weakens
www.theguardian.com/business/2017/jan/25/brexit-economy-weak-pound-inflation-jobs-market
www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/july2025